Perficient Inc

NASDAQ:PRFT

Earnings Call Transcript 2021-Q4

[Operator]

Hello, and thank you for standing by, and welcome to the Q4 2021 Perficient Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Chairman and CEO, Jeff Davis. Please go ahead, sir.

[Jeff Davis, CEO]

Thank you, good morning this is Jeff. With me on the telephone today is Paul Martin, our CFO; and Tom Hogan, our President and COO. As typical, we've got about 10 to 15 minutes of prepared comments, after which we'll open up the call for questions. But before we proceed, Paul, will you please read the safe harbor statement?

[Paul Martin, CFO]

Thanks, Jeff, and good morning, everyone. Some of the things we will discuss in today's call concerning future company performance will be forward-looking statements within the meanings of the securities laws. Actual results may materially differ from those discussed in these forward-looking statements and we encourage you to refer to the additional information contained in our SEC filings concerning factors that could cause those results to be different than contemplated in today's discussions. At times during this call, we will refer to adjusted EPS and adjusted EBITDA, our earnings press release, including a reconciliation of certain non-GAAP financial measures to the most directly comparable financial measures, prepared in accordance with Generally Accepted Accounting Principles or GAAP is posted on our website at www.perficient.com. We have also posted a slide deck which includes a reconciliation of certain non-GAAP guidance to the most directly comparable financial measures prepared in accordance with GAAP on our website under Investor Relations. Jeff?

[Jeff Davis, CEO]

Thank you, Paul. We appreciate your time today and are excited to discuss our fourth quarter performance with you. And of course, share our outlook and guidance for 2022. The fourth quarter put an exclamation point on a truly remarkable year for Perficient. Revenue and adjusted earnings were up 32% during the period. North American bill rates were up, utilization was strong and we set a quarterly record for large deal wins. As you saw from our guidance in the release, we are confident that our momentum will continue if not accelerate in 2022. Demand remains vigorous. I shared this sentiment on our last call, the Perficient's business and our potential has never been stronger. Digital transformation is driving tremendous spend, and it's now imperative than enterprise's expedite investment to innovate more quickly and operate more efficiently, and with pace of progress advancing and competitive pressures growing each day, the speed at which verdicts are rendered and winners are separated from losers is getting faster and faster. In fact, IDC recently increased their compound annual growth rate projection for digital transformation spend by a full percentage point to 60.5% annually, which represents an additional $1 trillion over the course of the next three years alone. I share all that, because it highlights the immense opportunity ahead for Perficient. Every day we are winning work with a growing number of global enterprises seeking exactly what we provide, strategy, execution and support and all of it rooted in pragmatism that understands must be created quickly. Organic offshore revenue grew 54% during the fourth quarter. Let me repeat that. Organic offshore revenue, which includes near-shore, primarily in South America grew 54% during the fourth quarter, and nearly 125% overall. Our global teams are strong contributors to virtually every large engagement we deliver now. In fact, just last week, the International Association of Outsourcing Professionals named Perficient a global outsourcing leader for the second consecutive year, based on quality and performance excellence. As a reminder, we now have more delivery talent outside of the United States than within it. I expect our offshore and near-shore headcount will continue to grow at a faster pace than it does domestically, but across the board, we are hiring at a faster pace and higher volume than ever before. In fact, we are having great success, scaling our team. A number of the things that are contributing to that success in recruiting and retaining the top talent includes several investments we have made in recent years to cultivate a truly exceptional employee experience for our colleagues, a few of which Tom will speak to shortly. But one key input is that, we saw this coming. In anticipation of the demand ramping and the labor market tightening, we more than doubled our recruiting capacity over of the course of the last year. We now have nearly 100 colleagues around the globe dedicated to talent acquisition. And candidates as well as clients are increasingly drawn to our differentiation. The combination of our strong U.S. presence with a deep and geographically dispersed global footprint truly sets Perficient apart. In fact, it's interesting to watch some others in this space, who lack domestic footprint and strong client relationships attempt to reverse engineer themselves into that position. Our strategy is working, enterprises want to work with a vendor that's local and global, but well-integrated, nimble and agile. And they want a partner that can deliver the strategy, execution and support they need seamlessly. That's Perficient and that's why our future is so bright. Finally, I want to welcome KORE Wireless’ Chief Executive; Romil Bahl to the Board of Directors. Romil’s appointment was confirmed earlier this week, and we're excited to have him join. Romil has significant experience and meaningful expertise on the technology service sector across industries and his perspective will be beneficial as we continue to scale the business. With that, I'll turn it over to Paul who will share the financial results for the fourth quarter and full year. Paul?

[Paul Martin, CFO]

Thanks, Jeff. Services revenue excluding reimbursable expenses were $210.3 million in fourth quarter up 32.3% increase over the prior year. Services gross margin excluding reimbursable expenses in stock comp increased 20 basis points to 40.5%. SG&A was $41.7 million in the fourth quarter of ‘21 compared to $33 million in the fourth quarter of the prior year. SG&A expense as of percentage of revenues decreased in 19.4% from 20.3% in the fourth quarter of ’20. Adjusted EBITDA for the fourth quarter ‘21 was $47.7 million or 22.2% of revenues compared to $35 million and 21.5% of revenues in the fourth quarter of ’20. Fourth quarter ‘21 included amortization expense of $5.8 million compared to $7.3 million in the prior year period. The decrease in amortization expense was primarily due to certain intangibles from PSL acquisition becoming fully amortized earlier in ’21. In the fourth quarter of ‘21, the company repurchased a portion of the 2025 notes, which resulted in a loss on extinguishment of $28.7 million. Net interest expense for the fourth quarter of ‘21 increased to $3.9 million from $3.3 million in the prior year, primarily as a result of the issuance of the 26 – 2026 notes partially offset by the repurchase of the 2025 notes. We will be adopting the new accounting standard for convertible debt in the first quarter of 2022, which will substantially reduce interest expense. Net income decreased 46% to $4.5 million for the fourth quarter ‘21 from $8.4 million in the fourth quarter of 2020, primarily as a result of the loss of extinguishment of debt. Diluted GAAP earnings per share decreased the $0.13 share for the fourth quarter of 2021 from $0.26 in fourth quarter of 2020, again primarily as a result of the loss on extinguishment of debt. Adjusted earnings per share increased to $1 a share for the fourth quarter ‘21 from $0.76 a share in the fourth quarter of ’20. See the press release for a full reconciliation to GAAP earnings. I'll now turn to the full-year results. Services revenue excluding reimburse expenses for the full-year were $748 million, a 24.8% increase over the prior year. Services gross margin excluding reimbursable expenses and stock compensation increased 50 basis points to 40%. SG&A expense was $152.4 million compared to $134.7 million in the prior year. SG&A expense as a percentage of revenue decreased to 20% from 22% in 2020. Adjusted EBITDA for the year ended December 31, 2021 was $162.9 million or 21.4% of revenues compared to $116.3 million or 19% of revenues in the prior year. Year ended December 31, 2021 included $23.5 million of amortization expense compared to $22.9 in the prior year. The company repurchased the remainder of the outstanding 2023 notes and repurchased a portion of the 2025 notes, which resulted in a full-year loss on extinguishment of $29 million. Net interest expense for the year ended December 31, 2021, increased to $14.1 million from $10.1 million in the prior year. And again, we will be adopting the new accounting standard for convertible debt in the first quarter of 2022, which will substantially reduce interest expense. Our effective tax rate decreased to 16.6% for the year ended December 31, 2021 from 25.2% in year ended December 2020. The decrease is primarily viewed at an increase in stock compensation deductions and a decrease in non-deductible transaction costs compared to the prior year. Net income for the full year was 52.1 million compared to 30.2 million in the prior year, diluted GAAP earnings per share increased to $1.50 compared to $0.93 in the prior year. Adjusted earnings per share increased to $3.50 for the year ended December 31, 2021 compared to $2.50 in the prior year. Our earning billable headcount, December 31, 2021 was 5,613, including 5,213 global consultants and 400 subcontractors. For the first time more than half of our global resources are located in our global delivery centers. Ending SG&A headcount was 866. Our outstanding debt, net of unamortized debt discounted and deferred issuance costs as of December 31, 2021 was 326.1 million. We also have about 25 million in cash and cash equivalents and 199.8 million of unused borrowing capacity on our credit facility. Our balance sheet continuously was very well positioned to execute against our strategic plan. Finally, days sales outstanding on account receivable remained constant at 67 days. I'll now turn the call over to Tom Hogan for a little more commentary. Tom?

[Tom Hogan, COO]

Thanks, Paul. As Jeff mentioned bookings were historically strong in the fourth quarter. We booked 98 deals greater than $500,000 during the third quarter of 2021, comparison 80 in the third quarter 2020 -- fourth quarter, excuse me, in 2021 and 80 in the fourth quarter and 70 in a year ago period. So again, that's 98 deals, greater $500,000. And that compares to 80 in the third quarter and 70 in a year ago, period. And as a reminder, global delivery is embedded in virtually every one of those wins. Couple of examples. We closed an 8 figure deal during the quarter, helping out one of the world's leading manufacturers of construction and mining equipment, delivering its B2B and B2C sites. We're laser focused on driving results for our clients. And we work with this client to take advantage of some new customer experience features resulting in an increased investment in the platform. We quickly pivoted to help this client to secure additional, predominantly Latin America, based from teams to develop the solutions. In addition, we're also providing business analytics and aiding in UI design. Our global team will also lead the development of the manufacturers’ large-scale industry leading agile development framework. We also closed a near 8 figure deal in a multinational financial services company that we've been working with for over a decade. We're providing ongoing support for the company's mobile and online retail trading platform that supports as many as 9 million transactions per day. We're also building microservices for both their trading platform and the company's online application processing platform, including its web and mobile chat experiences to enhance their ability to provide premium level customer service to their customers. As we continue to win more and larger deals, it's key to compete for the talent to deliver, that not only includes the recruiting success Jeff mentioned earlier, but also means we're focused on the amazing talent already at Perficient. Our team is focused every day on improving the employee experience at Perficient. We know the employee experience is not just about providing competitive employee benefits. People want to be part of an amazing culture, an organization truly investing in training, their career growth, philanthropy, and even the tools to make their jobs less stressful and their days more productive. Everybody at Perficient wants the entirety of our efforts focused on thrilling our customers with innovation and impact. A great example of enabling our team to be more productive was the recent launch of our internally developed custom proprietary tool called Compass. Compass provides our business leaders and project managers with incredibly detailed project performance metrics, including real time project profitability data, as granular as the margins associated with an individual's contributions on a specific work stream. Compass also leverages an internally built business logic engine to provide our leaders with real time action steps, based on specific project data, such as client insights, budget burn, et cetera. Additionally, Compass provides resource management and talent availability information, insurers were maximizing utilization across the world. We are growing faster than ever before, and as our brand grows globally and as candidates fully understand the compelling employee proposition Perficient offers. We're making investments around the world and our colleagues, and just as important, our communities. At Perficient, we strive to do well and do good. And as we scale, we are excited about the additional opportunities it creates for us to change the world. One effort we're extremely proud of, and that is making change happen is our Bright Paths program, where recently we graduated and then hired an additional 50 employees. As a reminder, this is a program where Perficient finds ambitious and capable candidates from underserved and underrepresented communities. We then fully fund an extensive training program on their behalf that helps them to grow the skills they need to successfully earn an entry level consulting position at Perficient. Today, we have hired 67 people into Perficient Bright Paths, and it's a program we continue to expand. We are growing our team and changing lives, and our existing colleagues love celebrating the Bright Paths students' achievements and then welcoming down to the Perficient team. Beyond Bright Paths, we have hundreds of colleagues participating in an employee resource group designed to help advance women in technology, as well as hundreds more involved in our ERG, specifically around global philanthropy and giving. As we scale and continue to increase our influence and impact on behalf of the world's biggest enterprises, we also remain focused on growing the positive change we can make on the world around us. And with that, I'll turn things back over to Jeff to discuss the first quarter and full year outlook.

[Jeff Davis, CEO]

Thanks, Tom. Great stuff. So, Perficient expects its first quarter 2022 revenue to be in a range of $218 million to $221 million. First quarter GAAP earnings per share is expected to be in a range of $0.64 to $0.67. First quarter adjusted earnings per share is expected to be in a range of $0.92 to $0.95. Perficient is providing full year 2022 guidance in a range of $900 million to $940 million in revenue, and 2022 GAAP earnings per year guidance in a range of $2.94 to $3.09. And finally, 2022 adjusted earnings per share guidance in a range of $4.18 to $4.33. So with that operator, we can open up the call for questions.

[Operator]

Thank you. [Operator Instructions]. Our first question comes from Mayank Tandon with Needham.

[Mayank Tandon, Needham]

Congrats, Jeff, Paul and Tom on the strong quarter. Jeff, I wanted to just start with given the strong demand backdrop, could you talk a little bit more about your talent acquisition strategy and should we think about maybe the company expanding delivery hubs to be able to source the talent to meet the demand requirements?

[Jeff Davis, CEO]

Sure. Absolutely. I'm going to ask Tom to add some color to this as well. But we have done that, and have put in place a number of locations including our Lafayette Development Center in Lafayette, Louisiana, obviously our global development centers and we're going to continue to look at other opportunities to scale, but we touched on Bright Paths. I'll ask Tom to comment on campus recruiting. That's another area we've dramatically stepped up our efforts, both in the United States as well as outside the country. And as I mentioned, in terms of the increasing our recruiting, we've also put some new management in place and change the structure a bit there to really step up the efficiency of that team. So it's a combination of added resources as well as increased efficiency. And as Tom mentioned, things are going very, very well so far -- I would say that acquiring talent has not presented any kind of a hindrance to the business, but I'm going to ask Tom to add some color to that.

[Tom Hogan, COO]

And in addition to Bright Paths Jeff mentioned, our college recruiting, we've added more college recruiting hires here in January and we're actually tripling the number of hires we'll have in June. So continue to bring in a diverse set of talent. I also say globally, we continue to invest additional opportunity in Latin America organically, and in India, we are looking at -- we've taken some great opportunity during the pandemic where some folks are working remotely. We're actually opening three new hubs here in 2022 based on additional growth in certain cities. So, we continue to expand our footprint globally, organically and there's a great team that's been joining us along the way.

[Mayank Tandon, Needham]

And then just a quick follow-up maybe for Paul or Jeff, in terms of the margins. Do you get the sense that maybe the pricing leverage that is there in the market right now, given the strong demand climate can offset the wage inflation pressures? Or would you need to maybe use other levers to be able to manage margins? And in that context, what is your margin expectations for fiscal 2022?

[Paul Martin, CFO]

Yes, I'll take that. We mentioned that ABR was -- I think it was about 2 points year-over-year in the fourth quarter. I do think that there's increasing pricing leverage, right? It's becoming a little bit of a seller's market, and we're certainly taking advantage of that in a judicious way. We're very focused on growth, so we want remain of course in our rates. However, in short, the answer to question is, yes, I do think that rate increases can largely offset merit increases as well as the other levers that we have there, are both Bright Paths and campus recruits. And I'd also say that as we continue to steal the business, there's more and more opportunity for the base of the pyramid. So, a lot of the folks that we're hiring right now are actually below the average comp, because they're more junior resources. So that helps offset obviously, the merit increases for that more tenured team. And then, last thing I'll say about margins as it relates to gross margins is, we certainly leverage our offshore and nearshore teams and the pricing, the cost advantages there. Of course, wage inflation there as well. But again, I would say it's -- there's other factors still apply. But our goal on gross margins is to maintain 40% plus gross margins and really focus shift our margin focus [indiscernible] margin focus more to adjusted EBITDA. And I would say that we'll see some expansion with adjusted EBITDA this year, maybe not quite as much as last year but I think 100 basis points is reasonable. But in terms of expectations for gross margin, adjusted gross margin, I would say, around the 40% maybe a little bit over that range. And I think there's potential upside to that, but at this stage there's so much churn going on in terms of the demand in the market. I don't want to get over our skews. I think there's an opportunity for us to beat that, but I also very confident we'll be able to sustain that 40% plus range and again, probably at 100 basis points or so to adjusted EBITDA.

[Operator]

Our next question comes from Maggie Nolan with William Blair.

[Ted Starck-King, William Blair]

Hey, this is Ted on for Maggie. Thanks for taking our question. So I wanted to start with kind of the mix of solutions, and how that's changed over the last several years. So I guess, how has the mix of the customer application solutions versus consulting versus analytics work and some of the other solutions? How does that overall mix change versus kind of historical levels?

[Jeff Davis, CEO]

I would say that all of those areas are up. Data is huge, not surprisingly. But so is custom app dev. The environment we're in, there's a tremendous dynamic. I don't have to tell you within the technology platforms out there, there's always something new to take advantage of. So there's a sort of that continuous pivoting basically to where the demand is or where the demand's going to be as we interpret it. So I would say across the larger higher level landscape there haven't been tremendous changes other than I would say, certainly data stands out as a big one. What the changes are, are probably a little more below that layer, where again, the platforms change and there's a lot of new generation or next generation technology that we’re engaged in delivering.

[Ted Starck-King, William Blair]

And then just a follow up, I wanted to ask about the competitive environment for talent here particularly in Latin America and India. Do you anticipate just given what's going on in the geopolitical environment in Eastern -- Central and Eastern Europe? Do you anticipate the competitive environment for talent changing in Latin America and in India?

[Jeff Davis, CEO]

I think that's an interesting question. The folks -- I don't want to get too deep into this, the geopolitical aspect, but I think the folks that are more reliant on where the disruption is right now, don't have a big presence in Latin America, certainly. And not even a great presence in India, will they try to increase that? I'm sure they will, but I can tell you the competition for talent there now is pretty steep. And I think that the differentiations that -- differentiators that Tom mentioned earlier become really significant factors. And there's a few things, even things that I won't even disclose on this call that we do that are differentiated in those countries, even, from a lot of our competitors, which revealed itself or manifests itself in actually lower attrition in both of those areas than our competition. So will there be increased competition for resources? Absolutely. Do I think that what's going on right now in Eastern Europe is going to make a market change to that? I think possibly, but I think modestly, it's hard to predict.

[Ted Starck-King, William Blair]

And I think I just missed it. What was the organic growth rate implied in the full year guidance?

[Jeff Davis, CEO]

The range is 15 to 20% organic.

[Operator]

Our next question comes from Puneet Jain at JP Morgan.

[Puneet Jain, JP Morgan]

Let me ask about revenue guidance. The range organic guidance 13% to 19% give or take. What needs to happen to demand environment for you end up at 13% for this year, given that you are going to state a year at 20% plus?

[Jeff Davis, CEO]

Absolutely. I think, if you saw all the company for a while, I know as well, we always try to be reasonably conservative or cautious, particularly at the beginning of the year, particularly in the environment that we are in. So, I'm optimistic that we won't see 13%, in fact, I'm optimistic that we'll even beat our high-end, and I'm pretty bullish. But it's more about the unknown, that's kind of baked into that is how I'd respond to that.

[Puneet Jain, JP Morgan]

That's fair. And then on the supply side, can you talk about like the wage inflation, is there are any differences in wage inflation rates or costs, different regions, like in Latin America and India and the U.S.?

[Jeff Davis, CEO]

Absolutely. And Tom I'm going to ask you to comment on this as well, in maybe in a little more detail. But we certainly are seeing wage inflation across the board. It's actually not as much in the U.S. from our perspective than it is in Latin America and in India, I would say is some other way it has been. There is always been significant wage inflation there. But as I said, through attrition, we were able to hire in lower cost resources and through expansion, of course, we are able to hire in lower cost resources to help to offset that. And again, as I mentioned before, our attrition rates in those areas are better than our peers. So I'm optimistic that again we will be able to manage against that. And as I said before, we've already moved rates up really in a single couple of quarters. We really weren't focused terribly on rate increases in the first half of last year, as we began to turn attention to that, as we saw wage inflation coming. We were able to already move the meter, a couple of points in the second half of the year on a year-over-year basis. And I'm optimistic we are going to see more of that coming to fruition now. There is a lot of deals that we've closed here. The bookings are a back end loaded, back and front end loaded. So Q4 and Q1 represent the largest quarters for bookings, and in those bookings we have rate increases there. We have also managed in some of our larger contracts or many of our larger contracts and our larger relationships to get clients to agree to COLAs or cost of living adjustments front in revised MSAs and also in statements of work. So, I think we are hitting it on all fronts. Again, it's obviously there. It's real. But so far, we feel pretty confident we are going to be able to stay even, or ahead of it. Tom, anything you'd like to add?

[Tom Hogan, COO]

I think that well to sums it up. I think in addition, we are also selling a holistic proposition to individuals coming into Perficient. We don't get into a complete buying in talent that we see from some competitors out there. Quite candidly, we have individuals that are accepting a competitive wage, but maybe less than in someplace else because they see the upside of Perficient and a career growth and the true opportunity within the organization, which is a competitive advantage. And we stand by the value that we bring to both our clients, which is also helping with the rates as Jeff mentioned, but also providing an environment that teams want to be a part of. And we don't have to play the aggressive wage game that some others do. And we stand through and the ability to provide a phenomenal opportunity for people to join the organization, and pay appropriate rate but not excessive. And that's bring great talent in the organization for the right reasons.

[Operator]

Our next question comes from Vincent Colicchio with Barrington Research.

[Vincent Colicchio, Barrington Research]

Jeff, the healthcare in the mix is down year-over-year, I think the same as last quarter. And just curious if the variant has had an impact on that, and if you'll see things recover here going forward.

[Jeff Davis, CEO]

So some of that is dilution from acquisitions and the fact that actually we're growing some other sectors even faster than we were before, but absolutely, even on absolute basis, I think the bookings are down a little. I do think some of that's due to COVID, which is put some budget constraints primarily on the providers. The payer market is continues to be strong. And really, I would say that the whole industry continues to be strong in demand. We do have a large client there that we are gradually winding down the relationship with, which is fully baked into everything you've seen here. And in fact, we wound a lot of it down last year, so that's a factor as well, but I think all those things combined tell me that it is temporary and that we'll see a pickup there. In fact, the bookings that we saw in Q4 were up year-over-year in healthcare. So, again, I think, we'll transition that relationship, and I think we'll see a pickup here as COVID subsided it. I can tell you that within that industry, the demand and the need for digital transformation remains very, very strong. I'm on a board of a local, just a local regional hospital. And I can tell you that, that digital transformation has risen to the top of -- and they're small and they don't have a lot of money, but it's still the top of their priority list. So I still think we're in early innings there to use the baseball metaphor. And yes, I do think we'll see a bounce to your question.

[Vincent Colicchio, Barrington Research]

And to what extent do you think you're currently benefiting on the demand side from clients suffering from the tight labor market in terms of their ability to do things internally?

[Jeff Davis, CEO]

I think it's a great question or great observation. And I do think there's definitely a benefit to us for that. When times are good like this, I've been in this industry longer than I care to mention, but when times are good, like this, everybody loves to be in consulting, because it's more nimble, it's more challenging. You get to see more things and do more things and probably make a little more money. And so, yes, I think the industry at large and certainly we've argued that Perficient specifically is a preferred employer for these folks. And so I think that does make it tougher for what we call industry to hire IT professionals, which I think is, again, a benefit for all of consulting or all outsourcing.

[Vincent Colicchio, Barrington Research]

And Tom, I missed what you said in the bookings for large deals, the numbers that were added this quarter versus the year ago period.

[Tom Hogan, COO]

So 98 in this quarter was compared to 80 in Q3 and then 70, year ago.

[Operator]

Our next question comes from Surinder Thind with Jefferies.

[Benjamin Hogg, Jefferies]

Hello, this is Benjamin Hogg dialing in for Surinder and congratulations on a strong quarter. Since offshore delivery typically carries a higher margin relative to onshore. I was wondering how much of a benefit do you guys receive from the overactive acquisition is the gross margin for that business higher than 50%?

[Jeff Davis, CEO]

Yes, I would say, I'll let Paul come in on this as well. I would say that, that was -- it's a great acquisition and it's growing fast. I wouldn't say that it necessarily by itself moved the meter much as much as the collective offshore or nearshore, but again, I'll say that it's our goal to continue that top line growth and accelerate it. And so we want to stay competitive as possible. We're obviously got a finger on the pulse of the market. We look at every competitive deal as best we can understand the pricing and frankly, we do have access to a fair amount of that. In terms of the pricing on many deals that we lose, we rarely lose on price and I want to keep it that way. So in terms of margin expansion again, it's going to be primarily at the EBITDA line and we're going to try to keep pricing as competitive as we can. And frankly, if we could even have a price advantage, I would take that over trying to expand gross margin beyond where it's at, at the moment. That might change, that strategy might change, but that's the current thinking. Paul, anything you wanted to add?

[Paul Martin, CFO]

Yes, so I think the acquisition -- roughly similar margins to other line American business, so it didn't have a big impact overall. Really the organic growth, offshore probably had a bigger impact on improving margins and with rolling acquisition just to build our capabilities, expand our global delivery center capacity that'll help us grow that high margin offshore business over time.

[Benjamin Hogg, Jefferies]

And then just another housekeeping question. What is the sort of expected net interest expense for 2022?

[Paul Martin, CFO]

So net interest expense will be down in 2022. Maybe Jeff, you take the next question, I’ll look that up. So interest expense -- interest expense should be in 2022 somewhere around $2 million to $3 million.

[Operator]

Our next question comes from Brian Kinstlinger with Alliance Global Partners.

[Unidentified Analyst]

Hi, this is Matt in for Brian. Just a quick question on the employee turnover. Do you have any metrics as far as that goes, like I know you guys have put in a lot of initiatives to retain employees and to attract competent talent, but do you have any metrics on the turnover so far?

[Jeff Davis, CEO]

It's running in the kind of low to mid 20s which is higher than our 15% to 20% goal. And of course, higher than during the throes of the initial part of the pandemic, which was below 15. But I think a really important factor. And again, I'm going to invite Tom to add anything to this he'd like, but a really important factor to note there. And I think it's particularly fascinating and sort of underscores kind of my theory on it, which I'll share, is that, for our -- one of the really important metrics we track on attrition is for our 2 year hires. So people that have been with us for two years or less, where we believe that's a more vulnerable group, and obviously a very important group, right, as they represent, many of them represent the future. Some of them are experienced, but many of them are more junior. And that's actually been only 19%. So we're really encouraged by that. I think it underscores what I believe to be the case. And that is, so we have 15% in 2020, we have 24% or something in 2021, that tells me that we had some pent-up demand or pent-up desire and discreate designation, right? We are not alone. It's happening across the globe effectively. And I believe that is temporary. Everything cycles and I'm not saying, it's going get better even this year. But there is no question that a lot of it is because people didn't have the mobility over the last year or two that they normally would. And now that things have improved, we're seeing that peak up, whether we have seen the absolute peak or not, I don't know. But again, I'm encouraged by the fact that people joined us during the pandemic aren't leaving. There is still here. And the ones that are leaving are people that had been around that probably would've left if they had the opportunity. Tom, anything you want to add?

[Operator]

[Operator Instructions] Our next question comes from Jack Vander Aarde with Maxim Group.

[Jack Vander Aarde]

Jeff, you mentioned IDC, I think recently bumped up their growth forecast for digital transformation spending at 16.5% CAGR so, and obviously you guys provide strong guidance for 2022 which I think, 21% growth at the midpoint. But can you just share your perspective or any thoughts on that IDC growth CAGR growth to why you think Perficient revenue can grow at next 40 years or so?

[Jeff Davis, CEO]

I think it, to me, we are not only benefiting of course from the spend in the areas that we are primarily focused on. I mean, 90% of our portfolio sits squarely in the middle of what IDC is referring to. So we are going to benefit and continue to benefit from that. I think for the foreseeable future, certainly the 3 year mark that they pointed out. And of course, we are taking share as well. So I remain optimistic that, we will be able to continue the performance that we are. And frankly, as our offshore and near-shore component continues to grow at the pace or roughly the pace that it has, again I'll remind you guys, it was 54% for the year last year organic, as well as the quarter. And I think that's going to continue, and if that continues to become a larger and larger component of our business, I think it'll eventually accelerate growth, right now, because the rate differential is not contributing as much to the growth as it could be. But once the business is more towards the 50% mark in terms of revenue offshore, onshore. I think we'll see growth accelerate even more. So I think that 16% -- 16.5% is very encouraging, makes me confident that between that and again the mix shift and us taking share away. And the reason I bring up the mix shift is because that's where a lot of the shares coming from is our stalwart long-term trusted clients or client that trust us, now giving us new incremental business around offshore and nearshore, which is -- we really couldn't have pursued a couple years ago. So I think it's very encouraging, and by the way, I'll note that I think it's the first time that I can recall, as long as I'm in the industry that IDCs ever adjusted anything up. So, I think it's good news for the industry at large, and I think it's great news for Perficient.

[Jack Vander Aarde]

You mentioned maybe the revenue mix from offshore longer-term when it hits 50% or breaks that, just can you help me out with what is that today? The revenue mix from offshore?

[Jeff Davis, CEO]

I want to say, it's about 8, Paul can you give a crisp number on that. I want to say it's between 15 and 20.

[Paul Martin, CFO]

So actually, with the acquisition just here over that, it should run low 20s the first half year and obviously accelerating as we go.

[Jeff Davis, CEO]

So if we continue – we can see 50/50 potentially within 3 years, by the way.

[Jack Vander Aarde]

Fantastic color, and just one more for me. Just on the acquisition strategy, potential timing, pipeline of targets, looking at 2022 and longer-term. Any change to your general strategy for acquisitions that you've previously outlined in past quarters?

[Jeff Davis, CEO]

No, not really. We've got a recipe that's working well, we're going to stick with it. Our strategy around acquisitions is going to be clearly to try to skate where the Buck's going, and find us either new to newer technologies and/or technologies that are just in high demand that we can gain quick scale around through acquisitions. So, yes, 50 million to 60 million of run rate revenue acquired, perhaps more, if we can find deals of the size that can bring that. I think we could easily digest probably four or maybe even five acquisitions in a given year, if we can find the right ones. So it could exceed that, but goal remains still roughly the 50 million to 60 million, 2 to 3 deals.

[Operator]

And I'm not showing any further questions at this time. I'd like to turn the call back over to Jeff Davis or any further remarks.

[Jeff Davis, CEO]

Very good. Well, thank you all very much for your time today and your interest always. I think we've demonstrated here a great run that we're on that I think is, as I said before is going t continue for as far as I can see. So, we're very excited about it. Thanks for your time today. Look forward to speaking with you in a couple months with more great news.

[Operator]

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.